Absence May Make the Club Grow Stronger

Monthly Meetings? Some Groups Get Together More Often, Others Opt Out

Monthly meetings are a hallmark of the investment club approach to building a portfolio. Meeting once a month not only assists clubs in meeting one of BetterInvesting’s core principles — that of investing regularly — it also serves to put the brakes on the use of more active investing strategies. It’s difficult to engage in anything but a long-term-focused approach to selecting stocks if a club comes together only once a month to make portfolio decisions.

Even so, there are often exceptions to this rule about meeting once a month that can serve to improve the club’s portfolio returns or enhance members’ education, or otherwise strengthen the club’s operations. Many investment clubs take a brief hiatus during certain times of the year. Clubs in the far north of the U.S., for example, may suspend operations during the winter months when travel to meetings may become less certain or safe or because members have fled south to spend time in warmer climes. Other clubs find it more difficult to meet in the summer when members are enjoying vacations or spending time at their lake or mountain cottages.

These brief breaks in the club’s meeting schedule can actually help strengthen the club in many ways. Instead of worrying about whether a quorum can be pulled together to hold an official club meeting or leaving the club’s business in the hands of a few overworked members, members come back refreshed and stimulated, ready to tackle the tasks of portfolio management and club operations.

Once they have a few years behind them and a sizable portfolio built up, other investment clubs take a slightly different approach to their meeting schedule, electing to adjourn only every other month or even once a quarter.

The members of these clubs need to have a firm grasp on the fundamentals of stock investing, and the club should already own a strong core portfolio of quality stocks. Club members still contribute the same amount of money each year — that is, twice or four times the minimum monthly amounts they’d be contributing if the club met monthly — but merely write fewer checks according to the club’s meeting schedule.

From an investing perspective, these schedules can work quite well. Each club should have a set minimum amount they’ll invest in any purchase of stock, both for a new com­pany or for adding to an existing position in the portfolio. Typically, this amount would be high enough that commissions and fees would be less than 1 percent of the total investment and that the security would total at least 3 percent of the club’s overall portfolio value. As a club grows, this minimum investment value must grow as well. But this also means that it takes longer for the total collected from members to reach the amount of cash that meets the minimum investment amount. Meeting every other month or quarterly allows the club to collect the member contributions needed to make investments at a material level with fewer meetings at which new or re-investments can’t be considered.

Of course, in any case where a monthly meeting schedule is adjusted, the club should have an ICE plan in effect. ICE is an abbreviation for “in case of emergency,” and the club’s ICE plan should address the contingencies in force when one of the club’s holdings is deemed to be in peril and action by the club may be required.

Most club partnerships allow for meetings to be held electronically or telephonically for just these kinds of circumstances. The club’s president needs to call the meeting and the secretary can inform members by email or telephone about the meeting time along with the means by which the meeting will be held (such as by telephone conference callor Internet chat or by using an online meeting tool).

When the club members have assembled, business would be conducted as at any face-to-face meeting: Once a quorum is established, motions are entertained, discussions held and votes tabulated.

Chances are good that clubs might never need their ICE plan. But as with any contingency plan, if you don’t have one in place, odds increase that you’ll run into a situation during which you need its provisions.

Spreading out a club’s meetings works for many investment clubs, but others may choose a more intensive approach to portfolio management and member education by meeting more frequently. Patricia Edwards, Better­Investing volunteer and the author of In Search of the Green: How to Form Your Own Investment Club When You Don’t Know From Beans (AuthorHouse, 2005), once told me how her investment club meets twice a month. The first meeting is all business, at which decisions are made about purchases, sales and other club matters. The second meeting is devoted to education and studying stocks: examining and comparing companies, researching industries and learning the nuances of the Stock Selection Guide.

There are several benefits of meeting twice a month. Many members have experienced the “never-ending club meeting” — a meeting that drags on and on as members discuss and debate stocks that have been presented, along with an educational presentation made by the vice president, a review of the club’s current portfolio by the treasurer, individual reports on stocks by various stockwatchers and still more regular club business. And it’s certainly true that the longer the club meeting is, the less productive and more frustrating it becomes.

In Patricia’s club, by scheduling a second meeting to consider and discuss stock studies, the primary meeting becomes much more productive. Mem­bers are already familiar with the stocks on the table and have had time to do additional follow-up research.

Some clubs may balk at the idea of physically gathering together a second time each month. This is where technology can help. My own investment club, an online one that’s been in existence since 2006, conducts an informal educational meeting each month using GoToMeeting in which members present stock ideas and discuss learning topics. By sharing the screen, members can display their Toolkit 6 stock study or research on websites for a particular company. Then, at our “regular” meeting, members are better-prepared for the business at hand.

Although GoToMeeting may be cost-prohibitive for many clubs, free and low-cost options are available for this kind of online gathering. For instance, Google’s new Hangouts service allows up to 10 people to chat by video using their mobile phone, computer or tablet. The service is free — go to plus.google. com/hangouts.

There’s no doubt that younger in­vestment clubs — those less than three or four years old — benefit most by meeting on a regular monthly sched­ule, with education the focus. But for more mature clubs, adjusting their meeting schedule to fit members’ needs can be a smart move to increase productivity and portfolio returns without straining their membership’s limited time and resources.

Douglas is ICLUBcentral's product manager, helping develop the company's programs including Toolkit 6, myICLUB.com, and the Investor Advisory Service. He is also the author of several investing books, including The Pocket Idiot's Guide to Direct Stock Investing, The Complete Idiot's Guide to Online Investing, The Armchair Millionaire, and Investment Clubs for Dummies.